Markets are back in full swing in the first full trading week of 2013. The FTSE 100 is still above the 6000 mark and banks are having a whale of a time, rising strongly after European liquidity rules were relaxed slightly. If only the pesky U.S. budget could be sorted once and for all.

Against this background, the City’s number crunchers have been penning their views on Europe’s leading companies. So, if you’re looking for investment tips, here’s a taster of what they’re saying.

Bloomberg News

The first selection is from Deutsche Bank.

Deutsche Bank analysts are worried about the European utilities sector. Here’s what they said:

“The worst is yet to come. We see further downside earnings risk for generators in Central and Northern Europe where the market is pricing in the view that the structural capacity overhang will eventually be cleared. In our view it cannot without a fundamental regulatory overhaul, which looks unlikely.”

DB added that it sees no “safe havens” and only selected value in the U.K. and Southern Europe. It has downgraded Electricite de France, Snam, Terna, RWE and E.ON.

Switching sectors, the brokerage has upgraded British American Tobacco.

Equities are up in European markets today, but there’s still caution in the air.

As usual, there are concerns about Europe, though this time the Dutch are causing jitters. This comes after the Dutch government collapsed and its Prime Minister Mark Rutte handed in his resignation, clearing the way for early elections.

It’s not all downbeat in Europe though. Shares in tire manufacturer Michelin were up nearly 7% after HSBC upgraded the stock to “overweight” from “neutral”. The upgrade comes after the company’s first quarter results, released on April 23.

Tobacco stocks are traditionally a haven for defensive investors during economic downturns. Cigarettes are one of the last discretionary spending indulgences to be given up by cash-strapped smokers seeking solace for their worries.

Factor in the addictive qualities of nicotine and you have a product with a steady revenue stream in trying times.

Now, though, cigarette sales are under attack from four areas.

First, a deep-seated structural recession, such as that being experienced by Southern Europe, is having an impact on purchases, with smokers buying less and/or switching to low-cost brands and products.

Second, sales are being hit by phased-in price increases as tobacco companies build margins to compensate for volume falls and claw back higher costs.

Third, governments are hiking taxes to both reduce smoking on health grounds and improve state finances crippled by a debt squeeze.

Fourth, a smoking ban in public places has also hit demand.

This morning, Imperial Tobacco, the world’s fourth-largest tobacco company by revenue, said its operating profit for Spain could slip by as much as £110 million more than previous forecasts as a slowdown in cigarette purchases in a crippled economy has led to a fierce price war in the country.

In effect, Imperial is taking a hit and slashing prices on its value brands such as Ducados Rubio and Fortuna to mitigate against margin erosion resulting from a drop in consumption.

The Bristol-based group said price moves in Spain during recent weeks had affected all market players, and that it was acting to protect its market position and the long-term sustainability of its business.

Once rivals decided to cut prices on its brands in Spain, Imperial was only going to follow suit.

It’s a familiar refrain from the tobacco industry: high excise hikes on tobacco products lead more consumers to buy their cigarettes on the black market. Governments should therefore be careful not to raise duty too sharply.

The clamour for higher tobacco duty from global governments in the last year should therefore have been a boon to spivs hawking cheap cigarettes the world over. Except of course on a global scale, this simply isn’t the case. In a year when governments across the world have been raising their excise rates on tobacco in an effort to trim their budget deficits, we should be seeing a huge rise in the illicit tobacco market. Right?

Well no. British American Tobacco’s Chief Executive Paul Adams said Wednesday there had been only a “slight rise” in the illicit market in the last year despite all the “significant” and “swingeing” excise increases mentioned in the company’s first-half results.